On December 8, 2020, the Supreme Court of the State of New York, New York County, granted summary judgment in favor of a commercial landlord seeking to recover unpaid rent under a retail lease where the tenant asserted the doctrines of frustration of purpose and impossibility of performance as defenses to its failure to pay rent (35 East 75th Street Corp v. Christian Louboutin LLC, No. 154883/2020 (N.Y. Sup. Ct. Dec. 8, 2020)). Judgment of almost $1.7 million was entered in favor of the landlord on December 21, 2020.

35 East 75th Street Corporation (Landlord) and Christian Louboutin, L.L.C. (Louboutin) were parties to a lease (Lease) for retail space on Madison Avenue and East 75th Street in New York City. Louboutin is a luxury brand offering high-end clothing and accessories. As a result of the COVID-19 pandemic, many state and local governments, including New York City, issued mandatory closures for nonessential businesses causing retail commerce to collapse (see COVID-19: Select State and Local Business Closures and Reopenings Tracker (US)).

Louboutin stopped paying rent on March 3, 2020. Landlord filed suit against Louboutin, seeking damages for unpaid rent and additional rent under the Lease. Louboutin argued that the COVID-19 pandemic absolved Louboutin from its obligations under the Lease due to:

The court granted Landlord's motion for summary judgment. While sympathetic to the fact that "the ongoing pandemic has decimated retail stores across New York City," the court found that:

The court also noted that the lease contained a force majeure clause that expressly did not excuse the payment of rent during a force majeure event, but rather only extended the time for performance.

We are in the early days of the emergence of a new body of case law emanating from the myriad and complex effects of the COVID-19 pandemic on the real estate industry. While this case represents one court's interpretation of a specific set of circumstances, it provides a discussion of how these defenses have been treated under New York law. For another example of a similarly decided case, see Legal Update, COVID-19: NY State Court Rejects Commercial Tenant's Defenses of Frustration of Purpose and Impossibility.

It is important to note that these two cases were both decided on the merits on a summary judgment motion. The trend in New York City shows that commercial tenants may remain obligated to pay rent under the terms of a lease in the event of a pandemic.

Because the lasting impacts the COVID-19 pandemic may have on real estate law are still unknown, it will be critical for practitioners to continue to monitor each new development, not only to keep current in a fluid environment, but also to try to discern emerging trends impacting real estate law.